Bush admin’s effort to spur oil shale production won’t do much for consumers in short run

New regulations proposed by the Bush administration are aimed at tapping the country’s huge reserves of oil shale, steps Interior Secretary Dirk Kempthorne said are intended to reduce America’s dependence on foreign oil in the short term.

But one man’s short term might feel like eternity to consumers paying $4.50 a gallon, as it would be seven to eight years before production from oil shale projects actually hit the market, according to another top Interior official who spoke with the media today.

“Assuming that the current research goes forward and is successful, I suspect you’re looking at 2015 or 2016 before there would be any significant production,” said Assistant Secretary Stephen Allred.

At issue are proposed regulations [PDF] issued today by the Interior Department that would govern the tapping of vast oil-shale deposits on federal lands. Energy experts estimate these deposits — located primarily in the Green River Basin of Colorado, Wyoming and Utah — hold up to 800 billion barrels of recoverable oil.

A moratorium on finalizing oil shale development regulations currently prevents the federal government from moving forward, but Bush administration officials and Republicans in Congress are now using high gas prices to push for legislative measures to make these resources available. Today’s announcement of proposed rules will move them one step closer to commercialized production, administration officials hope.

The proposed regulations, released by Interior’s Bureau of Land Management, would create a program to sell oil shale leases on federal lands much like those now sold for oil and natural gas development.

“We need to be doing more to develop our own energy here at home with resources like oil shale,” Secretary Kempthorne said in a conference call with reporters. “In the long run, the solution is to reduce the demand for oil by promoting alternative energies … In the short-term need to produce more at home.”

Kempthorne said that the oil shale “contains an amount of oil almost three times the proven reserves of Saudi Arabia or Iraq.” There are currently six pilot projects underway to explore the potential for production, and the technological and economic challenges.

Assistant Secretary Stephen Allred said that even if Congress lifts the ban and allows the department to finalize the rules, commercial leasing wouldn’t begin until 2012 at the earliest — depending on how pilot projects progress. If leasing began then, it would another several years before oil would be produced.

Oil shale was also touted as a solution to energy prices during the oil crisis of the 1970s, but companies largely abandoned the process in the 1980s after prices dropped and the resource-intensive process became cost prohibitive. Many in western states are concerned about a repeat of the ’80s bust, and about the water and energy resources that would be needed to make the technology work. They’re also not sure what effect bringing the process to commercial scale would have on land and wildlife.

It was Sen. Ken Salazar (D-Colo.) who inserted language to bar the federal government from issuing final rules for commercial oil-shale production into an omnibus spending bill last year. That moratorium expires on September 30 of this year. Salazar, who penned an op-ed on this in the Washington Post last week, says he will continue to push for a more cautious approach to squeezing oil out of the country’s shale.

“We are still years away from knowing if the technologies for developing oil shale on a commercial scale are even viable,” said Salazar in a statement. “As Western communities already know, this type of rush puts us at risk of another oil shale bust. Before we move ahead with commercial leasing, we need to know what impact oil shale will have on Western water supplies, whether the technology will work on a commercial scale, where we would get the power for the projects, and what effect it would have on our land and wildlife. To move beyond these draft regulations would amount to putting the cart in front of the horse.”

Wyoming Gov. Dave Freudenthal (D) and Colorado Gov. Bill Ritter (D) have also expressed concern about commercial production moving forward on federal lands within their states without adequate attention given to their concerns.

President Bush, meanwhile, called for faster motion on oil shale in his pro-drilling speech last week, arguing, “We should expand oil production by tapping into the extraordinary potential of oil shale.” And in the Senate, Republicans have introduced the “Gas Price Reduction Act of 2008,” which would lift the moratoriums on finalizing oil shale regulations and offshore drilling.

“With oil shale we know the oil is there,” said Utah Republican Senator Bob Bennett, when the bill was introduced last month. “We know the potential is there and no one is going to examine it until the rules are drawn up.”

So far it has 44 co-sponsors, though the likelihood they’d be able to move it in the Democratic Congress is slim. Today’s announcement from the Bush administration, however, is helping the GOP lawmakers renew their call to move forward with finalizing regulations. “We have to find more oil as we use less energy,” said Sen. Mike Enzi (R-Wy.) in a statement today. “It’s tough to harvest the energy from oil shale, but companies aren’t even allowed to try because some in Congress have barred the door.”

Environmental and conservation groups condemned today’s announcement of proposed regulations as a gimmick designed to create the impression that the Bush administration can lower gas prices by making more oil available.

“Today’s announcement is designed to give the American people the false impression that oil shale has some hope of lowering gasoline prices,” said Chase Huntley, energy policy adviser for The Wilderness Society in a statement. “But practical and technological impediments cannot be overcome by fiat. Instead of gambling our resources on unproven fuel sources, such as oil shale, we should invest in proven options that will reduce prices such as higher fuel economy standards, energy efficiency, and renewable generation technologies.”

Independent organizations have also raised questions about the economic and environmental realities of allowing leases for commercial oil-shale production.

“The government lacks important information about the costs and risks of development. It thus runs the risk of either being too lenient about lease bonus and royalty payments, allowing firms to have access without adequate compensation to the public, or too zealous, causing a loss of private-sector interest in oil shale development, especially for initial commercial plants,” James Bartis of the RAND Corporation testified to Congress in April 2007.